‘Banks vs Telcos’ row over $103m USSD debt may enter another round in Nigeria
The Volume of USSD Transactions in Nigeria
The volume of USSD transactions in Nigeria was 390 billion naira ($1 billion) in June 2020. Banks accounted for most of those transactions, with Guaranty Trust Bank (GTB) announcing 3.89 trillion in transaction volume for 2020.
Though USSD is critical for banks to offer their customers various banking services, it is driven by telcos. USSD is a text-messaging protocol that enables your SIM to communicate with the bank's computers. As such, consider it to be real-time instant messaging.
Since millions of transactions occur through USSD, the issue of who should pay has been at the core of a conflict between banks and telcos dating back to 2019.
The $103 Million Albatross
The Association of Licensed Telecommunications Operators of Nigeria (ALTON) threatened to shut down USSD platforms in Nigeria in December 2019 due to a $103 million debt. According to ALTON, you are charged neither banks nor consumers for using USSD for two years.
After two years of negotiations, the price of USSD was set at N6.98 per transaction, with the fees passed on to consumers by the Nigerian Central Bank and Communications Commission.
According to a statement from the CBN and NCC, "to encourage accountability, the new USSD charges will be obtained directly from customers' bank accounts on behalf of MNOs (telcos). Banks shall not charge customers extra fees for the use of USSD channels.”
This argument is critical because, at one point, telcos demanded payment from banks, which provided the service directly to consumers.
However, Godwin Emefiele, the governor of the Central Bank, as opposed to that decision. "The banks will not allow this to happen; they are the ones who offer the telecom companies this business," he said.
“I have advised banks that they must relocate their operations and traffic to a telecom company that is willing to provide it (USSD platform services) at the lowest possible cost, if not for free. And that is where we are, and that is what we must do."
An unstoppable force meets an immovable object.
Herbert Wigwe, the CEO of Access Bank, reiterated the CBN governor's position last week during an investor call, stressing that banks have no responsibility to telcos. According to him, "there is no such thing as a bank-to-telco obligation."
“We choose not to make a public comment about it because we believe it is inappropriate for us to be seen publicly competing with telcos.”
Additionally, he said, "While it is true that they continue to provide this service, it has little to do with banks."
The banks argue that consumers should pay for USSD transactions; however, ALTON alleges that banks paid their customers for two years and did not remit to telcos.
It is a moral problem, according to Gbenga Adebayo, Chairman of ALTON. He said to the Guardian newspaper,
"Whom do they intend to pay, and how much did they subtract from their customers for USSD services? What is the purpose of the deduction?
It is a mortgage, and the banks are obligated to compensate the operators. It is a spiritual imperative. It was 42 billion in January, and the figure continued to increase until it reached 45 billion by the time parties met.”
He added, however, that the settlement's terms are still being negotiated and that you will reach an agreement. Even if a settlement is reached, it suggests that Nigerian banks and telcos' terms of engagement with one another may change.
CBN’s intervention spares the banks blushes again
MTN subscribers in Nigeria were unable to purchase airtime last weekend via their bank app or USSD channel. It follows MTN's decision to make the commission it charges on airtime purchased via bank channels from 4.5 percent to 2.5 percent.
Although the big banks protested, challenger banks such as Kuda Bank maintained access to their MTN subscribers' platforms, demonstrating how rivalry can force the big banks' hand.
The CBN intervened once more to safeguard the interests of the large banks. It concluded with MTN reversing the commission cut.
Nobody should be blind to the hypocrisy of the CBN's actions. While the CBN advises banks to seek cheaper alternatives to telcos for powering their USSD banking, it is pressuring telcos to maintain bank-friendly pricing.
IT Courses and Certification
Telecommunications Course and Certificate
Fintech - Financial Technology Course and Certificate
Telecom Billing Course and Certificate
